What is a stop-limit order?

A stop-limit order triggers when price reaches a stop level. Once triggered, it places a limit order at your chosen limit price (or better), giving price control but risking no fill.

What is the difference between a stop order and a stop-limit order?

A stop order usually becomes a market order once triggered, prioritising execution. A stop-limit order becomes a limit order once triggered, prioritising price control but possibly not filling.

Why might a stop-limit order not execute?

If the market gaps through your stop and then moves beyond your limit price, there may be no liquidity available at your limit, so the order can remain unfilled.

Trading Basics

Order Types

Stop-Limit Order

A stop-limit order is a two-step order: it triggers at a stop price, then places a limit order at your chosen limit price (or better).

In plain English: "If price reaches this level, place my limit order — but don't fill me worse than my limit."

Example
The key trade-off
FAQ

How a Stop-Limit Order Works

Think of it as a stop order that does not become a market order. Instead, once the stop triggers, it turns into a limit order.

Two-step flow

Trigger: price reaches your stop level
Place limit: a limit order is submitted at your limit price (or better)
Fill (maybe): the limit order fills only if the market offers a price at or better than your limit

This is why stop-limit orders are popular when you want to avoid a "worst-case" fill — but they can leave you stuck in a trade if the market runs away.

Stop Price vs Limit Price

A stop-limit order uses two prices:

Stop price (trigger): activates the order
Limit price (acceptable fill): the worst price you will accept once triggered

Common beginner mistake

Setting the stop and limit too close together in a fast market can cause no fill. Setting them too far apart can defeat the point of price control.

When Should You Use a Stop-Limit Order?

Stop-limit orders are useful when you want a trigger-based order but still want some control over the fill price:

Breakout entries: enter only if price breaks a level, but avoid an extreme fill during a spike
Thin or volatile markets: reduce the chance of being filled far away from your intended price
Risk-sensitive exits: in some markets, traders use stop-limits to avoid panic fills — accepting the risk of no exit

For many traders, stop-limits are more common for entries than for protective stop losses (because "no exit" can be dangerous).

Example: Stop-Limit Buy (Breakout Entry)

A share is trading at £100. You want to buy if it breaks higher, but you don't want to pay above £102.

Stop price: £101 (trigger the order if price breaks upward)
Limit price: £102 (the maximum you will pay)

What can happen:

If price rises to £101 and there is liquidity up to £102, you may fill between £101 and £102
If price gaps from £100.90 straight to £103, your stop triggers, but your limit is £102 — so you may not fill at all

That is the stop-limit reality: you avoided a £103 fill, but you also missed the trade.

The Key Trade-off: Price Control vs No-Fill Risk

Stop-limit orders exist because traders sometimes prefer "no trade" to "bad trade". But you must be clear about what you are choosing:

Stop order: higher chance you execute, but you can be filled at a worse price (slippage)
Stop-limit order: tighter price control, but you might not get filled at all

Safety note

For protective stop losses, many traders prefer stop (market) style because the priority is getting out. A stop-limit "protective stop" can fail to exit during a gap — which can be very costly.

Common Misconceptions

"A stop-limit guarantees both trigger and fill."
It only guarantees the trigger attempt. The limit part can still remain unfilled.
"Stop-limit is always safer than a stop."
It can be safer for controlling entry price, but can be riskier for protective exits if it fails to fill.
"If the market touched my limit, I should have filled."
Not necessarily. Queue position, available size and how quickly price moved all matter.

✅ Quick Checkpoint

Try answering before expanding the model answers.

1) What happens after a stop-limit triggers?

A limit order is placed at your chosen limit price (or better). It then fills only if the market offers that price.

2) What is the main trade-off versus a standard stop order?

You gain price control but risk no fill, especially in fast markets or gaps.

3) Why are stop-limits often used for entries rather than exits?

Because missing an entry is usually less harmful than failing to exit a losing trade during a fast move.

Frequently Asked Questions

How do I choose the stop and limit prices?

Start with the trigger level (stop) based on your strategy, then set the limit to reflect how much slippage you're willing to tolerate. In very volatile markets, a wider stop–limit gap reduces no-fill risk but increases the maximum price you could pay/receive.

Can stop-limit orders be partially filled?

Yes. After triggering, your limit order may fill partially if there is limited size available at your limit price.

Is a stop-limit order the same as a stop loss?

No. A stop loss is a purpose (risk control). A stop-limit is an order type. Some traders use stop-limits as stop losses, but that can introduce no-exit risk during gaps.

Do stop-limits work the same on CFDs and exchange-traded markets?

The idea is the same, but execution rules differ by venue and broker model. In OTC products (like many CFDs), liquidity is based on the broker's pricing and LPs.

Summary

A stop-limit order triggers at a stop price and then places a limit order. It exists to balance trigger-based execution with some control over the worst acceptable price.

The trade-off is clear: price control versus no-fill risk, especially in gaps and fast markets.